The scarcity of labour keeps wage growth elevated
The unemployment rate declined, and the employment rate slightly increased
in the first quarter.
According to Swedbank’s forecast, labour market should remain tight this year,
so wage pressures persist.
Labour market remains tight
According to Statistics Estonia, labour market indicators improved further in the
first quarter of 2019. The employment rate reached 67.5% and the unemployment
rate dropped to 4.7%. The employment rate of Estonia is already one of the highest in the EU. In
2018, among the 20-64-year-olds, Estonia held the fourth position in the EU,
below Sweden (82.6%), Czech R. (79.9%), and Germany (79.9%).
Without the work ability reform (that
motivates people with a disability to look for a job), the unemployment rate
would be even lower. Around one third of the unemployed who are officially registered have
reduced work ability. Statistics Estonia’s data on the number of the unemployed
seems too small in the first quarter as the number of the officially registered employed exceeds that and all of the unemployed persons are not officially registered.
The Unemployment Insurance Fund’s registry
shows a surge in redundancies. According to the respective database, more than 1000 persons lost their jobs in the
first quarter, including many bus drivers, miners, bankers, and seamstresses. The
labour market remains tight, however, and many companies have already shown interest
in hiring them. According to Statistics Estonia, there were over 10 000 vacancies
in the labour market in the fourth quarter of 2018.
Employment increased more than expected
In the first quarter, the number of the employed persons grew by 11,000, over
the year. Employment rose among the part-time workers and in the services’
sector. The share of the part-time workers has climbed to 14%.
The shrinking of working-age population has
paused in Estonia in 2018-2019 due to higher immigration. Among the
15-74-year-old immigrants, 42% were Estonian citizens, 11% were Russians and 9%
were Ukrainians in 2018.
Wage pressure will persist
The number of job vacancies and the number of persons leaving on their own
initiative remains high. The shortage of labour was the main factor restricting
business for a fifth of manufacturing and a third of services’ and construction
companies in April 2019. Thus, wage pressure will persist. In 2019, we expect
the employment rate to remain high and the unemployment rate to stay low. The
average gross wage should grow by around 7% this year. Tax data shows that the growth
of the average gross wage has not decelerated (+8.5%, over the year, in the first
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